REAPING THE REWARDS OF ADC VENDOR SEARCH

JANUARY 27, 2015

Pete Apor, FujitsuLinda Delivorias, MercerErica Swett, Mercer

MERCER WEBCAST

MERCER WEBCAST

Pete AporFujitsuDirector of Retirement Services

Linda Delivorias, Esq.MercerPartner & Northeast Market DC Consulting Leaderlinda.delivorias@mercer.com

Erica SwettMercerPrincipal & Central Market DC Consulting Leadererica.swett@mercer.com

1

Speakers

MERCER WEBCAST 2

Discussion

• ERISA’s vendor search requirements

• Strategic & tactical vendor search process

• Fujitsu’s experience

• Questions

MERCER WEBCAST 3

• Identify viable, experiencedcandidates

• Evaluate based on consistentand comprehensiveinformation

• Document due diligenceappropriately

Vendor Selection Is Fiduciary Function Under ERISA

OrganizationalAssessment

Fees

Qualitative /Quantitative

ServiceAssessment

ServiceDelivery

Team

MERCER WEBCAST

A Successful Vendor Selection Process Incorporates AdaptableOutcomes to Support Vendor Management

Flexible FeeSchedule

4

CustomizedPerformanceGuarantees

ComprehensiveOutsourcing

VendorManagement

ImproveParticipantOutcomes

MERCER WEBCAST

And Now a Word From Our Audience

• What is the primary issue that would lead your organization toconduct vendor searches?

– Satisfy fiduciary obligations– Improve plan sponsor service– Improve participant service– Reduce fees– Other

5

MERCER WEBCAST 6

2004 2006 2008 2010 2012 2014 Future

Prudentialacquires

Cigna(2004)

Bank of Americaacquires

Merrill Lynch(2008)

VOYA Retirementis Branded

(2014)

Charles Schwabacquires

401(k) Company(2007)

Wells FargoacquiresWachovia

(2009)

Xeroxacquires

ACS(2010)

Great-Westacquires

JP Morgan(2014)

Hancockannounces

acquisition of NYL(2014)

EmpowerRetirement is

Branded(2015)

Recordkeeper Consolidation Continues to Impact Plan Sponsors

ING acquiresCitiStreet

(2008)

MERCER WEBCAST

And Now a Word From Our Audience

• Has fee compression and/or vendor consolidation resulted in adecrease in the quality of your vendor’s service delivery?

– Yes– No– Don’t know

7

.

MERCER WEBCAST 8

Vendor Search Outcomes Are Changing

Yesterday

• Full outsourcing• “Customized”

communications• Open architecture

investment platform• Transparent, market

competitive fees

Today

• Flexible, secured servicedelivery

• Measurable multi-mediacommunications program

• Investment strategy builton participantdemographics

• Fee schedule thatoptimizes vendorrelationship

…while the need to fulfill fiduciary responsibilitiescontinues to be critical

MERCER WEBCAST 9

Flexible Service Delivery

• Support retirement preparedness objectives

• Accommodate targeted designs

• Manage leakage opportunities

• Address data exchange requirements

• IT data security requirements

• Cloud data sharing

• Support plan sponsor reporting requirements and data access needs

Service Delivery Model – More Than Processing Transactions

MERCER WEBCAST 10

Multi-media Communications

• Delivery through mobile and traditional media

• Control over content, delivery and access of campaigns and tools

• Targeted messaging

• Integration with broader financial wellness tools

Communications Is Now Employee Engagement

MERCER WEBCAST 11

Investment Strategy

• Experience with non-mutual funds

• Tiered investment structure to reflect different participant risk profiles

• Comprehensive communication/trust services to accommodate complexinvestment structures and annuity products

• Material terms and conditions of brokerage and managed accountpartners

Movement to Simplified Investment Structures is Not WithoutComplexity

MERCER WEBCAST 12

Fee Schedule

• Per participant pricing independent of investment options

• Relationship considerations in establishing profitability targets

• Flexibility in managing revenue sharing

• Multiple plan considerations

• Impact of external third party service arrangements (advice, brokerage,etc.)

Fee Structure Should Mitigate Fiduciary Risk

MERCER WEBCAST

• Have vendor services become so commoditized that the “pain”of a conversion outweighs the potential benefits of starting anew relationship?

– Yes– No– Don’t know

13

And Now a Word From Our Audience

MERCER WEBCAST 14

Mercer’s Vendor Search Approach Aligns Sponsor Goals WithVendor Service Delivery Model

Objectives

Interdependencies

EmployeeEngagement

MERCER WEBCAST 15

Implementation Begins With Vendor Selection

Selection

• Currentrelationship exitstrategy

• Timing forimplementation

• Coordination ofinternalresources

• Lead time forcustom builds

Contracting

• Fees at risk forkey services

• Limits of liability• Advantageous

contract terms• Related third

party agreements

Conversion

• Appropriateexperiencedconversionteam

• Defined projectmanagementprocess

• Documentationof decisions

• System anddata exchangetesting

MERCER WEBCAST 16

Fujitsu’s Experience

• The leading Japanese information andcommunication technology company (ICT)Fujitsu

• $55 B annual revenue

• 560 companies worldwide with 170,000 employeesOrganizationBackground

• 401(k) plan and 2 non-qualified plans

• $1.3 B assets with 11,000 participants

• 98.5% participation and 10% average deferral

• Auto enrollment at 8% with auto increase and autocatch-up

• Average company match of 8%

Plan Background

MERCER WEBCAST 17

Fujitsu’s Experience

Client Situation

• Incumbent in place for 3 years

• No current service issues

• Desire to test the marketplacerelative to service levels andpricing

• Interest in innovative, broad-basedsolutions to improve wealthaccumulation opportunities

Mercer Solution

• Tactical and strategic vendor search

• Prequalification of vendors

• Highly customized RFP

• Finalist interviews (versuspresentations)

• Site visits

• Final negotiations

• Note: Blue items are tasks to be completed

MERCER WEBCAST 18

How Can You Identify the Optimal Partner to Deliver theAppropriate Services Timely, and At the Best Price?

Design

Delivery

EmployeeEngagement

SUCCESS

MERCER WEBCAST 19

Questions

QUESTIONSPlease type your questions in the Q&A section of the toolbarand we will do our best to answer as many questions as wehave time for.

To submit a question while in full screen mode, use the Q&Abutton, on the floating panel, on the top of your screen.

CLICK HERE TO ASK A QUESTIONTO “ALL PANELISTS”

FEEDBACKPlease take the time to fill out thefeedback form at the end of this webcastso we can continue to improve. Thefeedback form will pop-up in a newwindow when the session ends.

www.mercer.com/webcastsView past recordings and sign up forupcoming webcasts

Pete AporFujitsuDirector of Retirement Services

Linda Delivorias, Esq.MercerPartnerlinda.delivorias@mercer.comErica SwettMercerPrincipalerica.swett@mercer.com

20